Top 5 Signs of Fraud In Your Corporate Expense Reports

Expense fraud today is a far worse issue than most people realize. It costs organizations and companies in the United States billions of dollars each year, and adding to the problem is the fact that it typically takes several months if not years before the fraud is even detected.

It’s not like that expense fraud has to be an issue that goes unsolved. For example, investing in a quality expense automation software to run and process your expense reports instead of having it manually done by your accounting team can make it much easier to detect fraud.

But nonetheless, it’s still a good idea to know about the different kinds of expense fraud that’s out there, so in this article, we’re going to go over the top five signs of fraud to look out for in your corporate expense reports:

Expense Reports

Sign #1 –Comparable Employees Don’t Have Comparable Expenses

If there are two employees who are in comparable positions, you would expect them to have very similar expenses.

But now let’s say that you have two employees in comparable positions who don’t have similar travel expenses at all. Let’s say that one employee claims business travel expenses of one thousand dollars, but the second claims expenses of three thousand.

Does this automatically mean that the second employee is for sure guilty of expense fraud? No, but it is undoubtedly very suspicious and would certainly be worth a very close review. Pay especially close attention to the employee’s spending trends, and consider interviewing them for an explanation on why their expenses are unusually high.

Sign #2 –Acceptable Expenses Are Drastically Inflated

A common expense fraud tactic is for an employee to inflate acceptable expenses. For example, booking a hotel room should be an acceptable business travel expense at most companies.

But an employee may be tempted to exaggerate or inflate the cost of that hotel room. Alternatively, they may claim extra ‘fees’ that the hotel room charged beyond the price of the room.

The best way to guard against this fraud tactic is to have your employees submit a valid receipt for literally every expense they claim, and to furthermore make it a rule that no business expense will be reimbursed without expense.

Sign #3 –Non-Business Items Are Claimed As Expenses

There may be several non-business related expenses that employees claim as expenses anyway. For example, taking clients out to lunch or dinner should probably count as a business expense that the company can reimburse, but an employee eating lunch or dinner on their own probably shouldn’t (but they still may attempt to claim it anyway).

Another example would be an employee buying items that are not business related at all on their business trips and then claiming those as expenses.

What you need to do is educate your employees on what counts as a business expense and what does not, and then to clearly outline those in your expense reimbursement policy.

Sign #4 –Exceeding Expense Limits

This simply means that your organization sets expense limits for reimbursement and an employee attempts to exceed those limits.

In an attempt to hide it, an employee could try to split a larger amount into two or three expense reports overtime. What you need to do is make clear that only one business trip is allowed per expense report, and then set the limit accordingly.

Sign #5 –Double Billing and Duplicate Transactions

Another tactic an employee may try is to list a charge twice, such as the same taxi ride or hotel room, but under different trips.

To try and hide it, they could try to make a charge on a company credit card and then submit a receipt for the same exact purchase later, only as a cash claim instead. Carefully monitor the usage of your company credit cards to prevent this from happening to you.

Signs of Fraud In Your Expense Reports

Expense fraud is a major issue with companies and corporations all over the world today, but as was noted previously, one of the best ways that you can reduce expense fraud in your company as much as possible will be to use a high quality expense automation software that can do a much better job of detecting fraud in contrast to having expense reports handled manually.